Laffer Brings Economic Talk to Memphis

By Andy Meek

Bankers, financial executives, businessmen and other professionals will gather at the Holiday Inn University of Memphis on Monday, April 9, to hear from Art Laffer, a prominent national economist who has advised multiple presidents and presidential candidates since the 1970s on tax policy.

Laffer, who is addressing the Economic Club of Memphis for a talk sponsored by Waddell & Associates, will be discussing the tax situation locally and nationally.

Locally, he has been a vocal proponent of eliminating the gift and estate taxes in Tennessee, which many financial professionals frequently describe with the same word – “punitive.”

During his career, Laffer has helped popularize something known as the “Laffer Curve.” It’s a concept he made famous, although one he did not originate.

Basically: it involves sketching a parabola. At the bottom left point of the parabola is “zero percent” and at the bottom right is “100 percent.” Those both refer to tax rates that would produce no revenue for the government (if the government collected 100 percent of everyone’s income, no one would have a reason to show up for work the next day).

Different economists may use the Laffer Curve to prove different things. But it’s frequently used to assert that there is some midpoint on the parabola where the government is collecting the maximum amount of revenue at tax rates that are as high as they can go.

If rates are raised any higher, it increasingly becomes counterproductive, at which point you’ve begun to slide down the back end of the parabola – “on the wrong side of the Laffer Curve,” so to speak. In that scenario, people might do things to compensate for the rise in taxes like move money overseas – or move themselves away.

It should be a timely discussion, especially with the way Laffer has asserted himself on the national stage as part of Republican presidential primary politics. He supported Herman Cain’s 9-9-9 economic plan, for example, and Laffer has endorsed Newt Gingrich for the Republican nomination.

“It used to be that the sole purpose of the tax code was to raise the necessary funds to run government,” wrote Laffer, who lives in Nashville, in a recent paper titled “The economic consequences of Tennessee’s gift and estate tax.”

“But in today’s world the tax mandate has many more facets including income redistribution, rewarding favored industries, and punishing unfavored behavior. And even with the greatly expanded tax mandate, finding an appropriate tax code would be relatively straightforward if only people would stop changing what they do when the tax code changes. It’s like dodgeball; if only the other guy wouldn’t duck when you threw the ball at him, it would be easy to win. … High tax rates imposed on a narrow tax base are the worst. They produce disproportionately large distortions and thereby seriously damage the economy and yet yield little direct tax revenue.”

• In other financial news, meanwhile, Regions Financial Corp. – which earlier this month saw the completion of the sale of its Memphis-based investment unit Morgan Keegan & Co. Inc. – has now repaid $3.5 billion it got from the federal government during the 2008 financial crisis.

Regions, one of the dominant banks in Tennessee and in Memphis, was until now still holding on to the largest chunk of money received by a bank as part of the government’s Troubled Asset Relief Program.

• And in separate news, Pickler Wealth Advisors is the title sponsor for the First Annual Speakeasy Gala and Silent Auction April 14 at Lexus of Memphis to benefit the Memphis Oral School for the Deaf.

The event will have a Roaring 20s style and will feature a live and silent auction, music, dancing and food from Memphis restaurants. Proceeds will benefit the Memphis Oral School for the Deaf by going toward scholarships and operating expenses.

David Pickler, president & CEO of Pickler Wealth Advisors, is the current board chairman of MOSD. He’s been a board member since 2000.